TSMC Manufacturing in America, Packaging in Taiwan: When Localization Only Goes Halfway

The Event

TSMC's US fab (Fab 21) has begun mass-producing Nvidia's GB300 chips, but after completing wafer manufacturing, the products must be shipped back to Taiwan for backend packaging, testing, and yield classification. This decision appears wasteful, yet it reflects supply chain reality.

Why This Approach

Chip manufacturing has two stages: frontend (fabrication) and backend (packaging). The frontend requires $20 billion investments in massive facilities and extreme ultraviolet lithography machines—only TSMC and Samsung globally can do this. The backend is labor-intensive work with mature technology—hundreds of vendors worldwide can handle it.

America's goal is "local manufacturing" and meeting Chips Act subsidy requirements. But the US lacks mature backend capacity, and building new facilities takes 3-5 years. Meanwhile, Taiwan's packaging plants (like ASE) already have economies of scale, with per-unit costs one-third those of new factories.

Result: TSMC made the most economically rational choice—manufacturing in America, packaging in Taiwan. But this also means "American manufacturing" actually completes only 30% of the value chain.

Principle and Insight

Global supply chains will not completely relocate due to political risk; instead, they find balance between "cost optimization" and "risk mitigation." Pure localization is fantasy; smart localization means "keep high-tech, irreplaceable steps domestic, maintain global flexibility for replicable steps."